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's results are out and they're making a very good case that the company should simply never have bothered to purchase Patch and Huffington Post. The old business is still making good profits while the new ones are still making large losses:

AOL Chief Executive Tim Armstrong has invested heavily in content, including plowing well over $100 million into Patch, a group of hyperlocal websites that covers neighborhood news and events.

Even with all of that spending, the legacy subscription service is still the most profitable part of the company. The membership group, which includes subscriptions, posted operating profit of $146.4 million in the quarter.

AOL's media sites turned in an operating loss of almost $5 million. Those sites, which include Patch, Huffington Post, Engadget and TechCrunch, lost almost $17 million in the year-ago period.

"Patch is still a money losing proposition," said Ron Josey, an analyst with JMP Securities, who estimated Patch lost $100 million last year.

The point I'm making is an unfashionable one, true, but it's also still a true one. There's no particular reason why any particular corporate entity should survive. It just isn't true that a company must find something new to do if its core business starts to shrink. What it ought to be doing instead is thinking about what is going to provide the greatest return to shareholders: those shareholders who do own the business itself after all.

In this case, after the demerger from , should AOL have simply run that declining membership business into the ground? Or should it have done what it did do, use that income to finance the purchase of new assets?

There are indeed arguments either way. For example, that membership business (essentially, the old dial up AOL) is throwing off very good profits indeed. It will continue to do so for some years too. Eventually it will die, yes, but recall that the name of the game is shareholder returns. If we accept that it's a declining business and also that we're not going to worry about replacing it then a lot of the cost, the management overhead etc, can be stripped out of AOL. That would of course increase the profits: which could be returned to shareholders through a mixture of dividends and share buy backs.

Or, as they've done, they can use that profit stream to finance the purchase of new businesses. Which might, I agree, pay off better for the shareholders in the long run. But then again they might not. Takeovers very rarely make good money for the shareholders of the acquiring company after all.

Please note though that I'm not specifically stating that AOL has gone the wrong way here. I'm just using it as an example of a question that ought to be thought about more often than it is. A corporate entity doesn't have to survive into the long term and sometimes, in a shrinking business or market, the way to maximise returns to shareholders is to sweat that declining business for all the cash flow that's possible. As above it's arguable which way AOL should have gone: my suspicion is that just remaining AOL and sweating it would have paid off better.